A Green principle being adopted by the EU Commission

We Greens have a very clear policy on taxation: we believe that the onus of taxation should be shifted from labour onto pollution. In simpler terms, we would like to decrease the labour costs which any employer must pay for each of his/her employees (such as National Insurance costs).

This would encourage employers to invest more, employ more people and therefore contribute to creating more jobs. Let us remember that the creation of new jobs in the EU (five million in the coming years) is not only a priority of the EU; it should be a strong priority of all of us in Malta, even more so now, when we are passing through a bad economic patch.

On the other hand, we Greens, being sensible people, know full well that the revenue lost by government through labour taxation has to be recouped in some other way. And our proposal is the introduction, strengthening and enforcement of eco taxes.

Let us by all means reduce labour taxes for those investors who are contributing to the creation of jobs, but let us ensure that those companies, corporations or whatever that pollute are heavily penalised for their destructive behaviour.

Therefore, eco taxes basically mean the shift of taxation from labour onto pollution, with the clear proviso that the eco taxes collected should go into projects that rehabilitate the environment.

Of course, we would like to see this change in the tax collection system come about as quickly as possible. But, being realistic, we Greens understand that changes cannot come about overnight since this could negatively affect the economy and could result in a very heavy economic burden for SMEs and for poorer households.

We are ready to accept the phasing in over a period of time of structural changes in the Maltese taxation system. The important thing, however, is that the exercise gets going as quickly as possible.

One of the areas strongly related to pollution is that concerning energy. Malta's energy resources are all based on fossil fuels, which are extremely polluting. A change to alternative energies, such as solar, wind and bio-mass, is a must for us Greens. We are ready for a phasing in period, but the process of change must get going.

The EU is also very much into taxing polluting energy. However, the EU is also sensitive to the needs of the newly acceding countries and in fact last January 28 the EU Commission presented a proposal to amend the Energy Tax Directive to allow the EU accession countries, including Malta, to apply excise duty exemptions temporarily or lower rates of duty than the EU-wide minimum rates normally required on all energy products, such as mineral oils, coal, natural gas as well as electricity.

The varying arrangements proposed cover all the accession countries except Cyprus, which has not requested any measures in addition to those it was granted under the Treaty of Accession. The January 28 Commission proposals foresee exemptions limited in time, generally no longer than 2012, and a progressive alignment towards the relevant EU minimum rates.

The EU has made this proposal, with which we at Alternattiva Demokratika tend to agree with in principle, to avoid likely price increases in the new member states, something which would happen if excise duties had to be raised to the levels agreed on last year by the date of accession on May 1.

This new proposal, which must be adopted unanimously by the EU's Council of Ministers, would come into force on May 1, the date by which the accession countries will be required to apply the Energy Tax Directive.

What timeframes is the EU proposing for Malta, with regard to energy taxation? With regards to diesel and kerosene used as propellant, the EU minimum rate of taxation is €302 per 1,000 litres as from January 1, 2004, and €330 as from January 1, 2010.

The January 28 Commission proposals are that Malta can gradually align its taxes up to €330 by January 1, 2010. However, as from May 1, the level of tax must not be less than €245.

When it comes to leaded petrol, the EU minimum rate of taxation is €421 per 1,000 litres as from May 1. Malta is being offered the concession of gradual alignment up to January 1, 2010. However, the level of taxation must not be less than €337 as from May 1.

As for unleaded petrol, the EU minimum rate of taxation is €359 per 1,000 litres from January 1, 2004. Malta is being allowed gradual alignment to this amount up to January 1, 2010. However, the level of taxation must not be less than €287 from May 1.

In the case of heavy fuel oil used for heating purposes, the EU minimum rate of taxation is €15 per 1,000 kg as from January 1, 2004.

Malta has got to gradually align to this amount up to January 1, 2009 but the rate cannot be less than 50% of the EU minimum as from January 1, 2007.

As for electricity, the EU minimum rate of taxation is €0.5 per MWh for business use and €1/MWh for non-business use, as from January 1, 2004. Malta would be allowed a gradual alignment up to January 1, 2010, but the rate cannot be less than 50% of the EU minimum rate as from January 1, 2007.

With regard to natural gas, the EU minimum rate is €0.15 per gigajoule for business use and €0.30/gigajoule for non-business use, as from January 1, 2004. Malta would be given the concession to gradually align up to these levels by January 1, 2010, but the rate cannot be less than 50% of EU minimum rate as from January 1, 2007.

Finally, as regards coal, coke and solid fuels, the EU minimum tax rate is €0.15/gigajoule for business use and €0.30/gigajoule for non-business use, as from May 1. The January 28 Commission proposal allows Malta, with regard to solid fuels, to align itself gradually up to January 1, 2009.

However, the effective tax rate cannot be less than 50% of EU minimum, as from January 1, 2007. Malta is also being offered a tax reduction up to December 31, 2006, for fuel used in private pleasure craft and private pleasure flying.

The importance of all this is that now there is a proposed schedule, with a fixed timeframe, for Malta to introduce deterrents against the use of those toxic fossil substances that have been poisoning the blood of all of us and our children for the past 35 years or so. Here, we have a real blueprint for the phasing out of fossil fuels in favour of alternative energies.

It might not be as fast as we greens would like it to be... but it is there! Let us take advantage of this opportunity, offered to us by the EU to better our environmental and health standards. Let us start shifting the tax load from labour onto pollution.

arnold.cassola@alternattiva.org.mt